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Middle East funds to raise weightings in Qatar: survey Gulf well-placed to handle emerging market volatility

DUBAI, Jan 30, (RTRS): Middle East-based investment funds have become much more bullish on Qatar’s stock market, citing heavy government spending and attractive valuations, the latest monthly Reuters survey of the region shows.
Fifty-six percent of 16 leading investment managers said they expected to raise allocations to Qatari equities in the next three months, while only 6 percent expected to cut them.
That was the biggest positive change among the six major markets in the survey, and compared with 20 percent saying they would raise allocations to Qatari stocks in December’s survey.
Qatar’s government spending is expected to rise 11.6 percent in 2014 from the 2013 plan as the government boosts infrastructure construction, partly in preparation to host the 2022 soccer World Cup, the Ministry of Development Planning and Statistics said last month.
This comes at a time when several other Gulf governments, including Saudi Arabia, are slowing their state spending growth in order to rationalise their finances.
“Qatar has better near-term growth prospects than any other regional market. The government has a significant budget for infrastructure spending which we expect will be largely spent over the next three to five years,” said Afa Boran, head of asset management at Amwal Qatar.

Earnings
He estimated both the Qatar and Saudi markets were trading at about 12 times estimated corporate earnings for 2014, with Qatar having better near-term earnings prospects. Earnings growth in Saudi Arabia is currently being dampened by a crackdown on illegal foreign labour that has raised companies’ costs, analysts say.
The United Arab Emirates markets are much more expensive at about 15 times 2014 earnings, Boran said. Qatar’s main stock market index is up 35 percent since the end of 2012, while Dubai has soared 134 percent.
The survey was conducted by Trading Middle East, a Reuters forum for market profesionals.
The survey showed managers remained bullish on Middle Eastern equities in general, with the proportion expecting to increase their allocations over the next three months rising to 44 percent from 33 percent, though the ratio predicting a decrease also rose, to 13 percent from zero.
“With the dividend season in GCC markets, and with dividend yields of 3 percent-plus in most of them, it will attract more liquidity into the markets, especially if emerging markets continue to be volatile at the same time,” said Mohammed Ali Yasin, managing director of Abu Dhabi’s NBAD Securities.


Because of their big current account and state budget surpluses, Gulf Cooperation Council economies look much better placed than many emerging markets elsewhere in the world to ride out a reduction of U.S. monetary stimulus this year.
The survey showed that among the major Gulf stock markets, funds were least bullish about Kuwait, with only 19 percent expecting to raise allocations and 13 percent expecting to reduce them.
Continued political tensions between the cabinet and parliament in Kuwait are slowing big state investment projects and making economic reforms difficult.
Because of a high-level corruption scandal destabilising its politics and a sliding currency, Turkey has consistently been the most bearish country in the survey over the past five months.
The latest survey, taken just before a massive interest rate hike on Tuesday that may have stabilised the lira, showed 6 percent of fund managers expected to raise their Turkish stock allocations while a quarter expected to cut them.
Survey results
1) Do you expect to increase/decrease/keep the same your overall equity allocation to the Middle East in the next three months?
Increase — 7, Decrease — 2, Same — 7
2) Do you expect to increase/decrease/keep the same your overall fixed income allocation to the Middle East in the next three months?
Increase — 1, Decrease — 3, Same — 12
3) Do you expect to increase/decrease/keep the same your equity allocations to the following countries in the next three months?
a) United Arab Emirates
Increase — 6, Decrease — 4, Same — 6
b) Qatar
Increase — 9, Decrease — 1, Same — 6
c) Saudi Arabia
Increase — 5, Decrease — 1, Same — 10
d) Egypt
Increase — 6, Decrease — 3, Same — 7
e) Turkey
Increase — 1, Decrease — 4, Same — 11
f) Kuwait
Increase — 3, Decrease — 2, Same — 11


Note: Institutions taking part in the survey are: Abu Dhabi Fund for Development; Ahli Bank Oman; Al Rayan Investment LLC; Al Mal Capital; Arqaam Capital; Emirates NBD; Global Investment House; ING Investment Management (Middle East); Mashreq Bank; Naeem Financial Investments; National Bank of Abu Dhabi; Rasmala Investment Bank; Mohammed Alsubeaei & Sons Investment Co (MASIC); Schroders Middle East; Securities and Investment Co of Bahrain; Amwal Qatar.



  



 

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